Reserve Bank supervisory role to stay, says Cullen

Michael Cullen. File picture

The Reserve Bank's supervisory role will not be removed by a review of trans-Tasman banking regulations, Finance Minister Michael Cullen said today.

The assurance came after he said yesterday that Australian and New Zealand governments were "within sight" of an agreement on harmonising banking regulation.

However, he stressed that did not mean the Reserve Bank would be stripped of its banking supervisory role.

Across the Tasman, the Australian Prudential Regulation Authority (Apra) is the prudential regulator of the financial services industry.

"In Australia the two central bank roles have been separated with the Australian Reserve Bank responsible for monetary policy and the Australian Prudential Regulation Authority responsible for regulating the financial sector," Dr Cullen said.

"While a similar split is obviously an option for New Zealand that has never been my preference.

"There are strong arguments for retaining the prudential function within the Reserve Bank which has accumulated significant experience and intellectual capacity in this area."

In New Zealand, the Reserve Bank supervises banks but the Economic Development Ministry oversees credit unions, building societies, insurers and finance companies.

Dr Cullen said Australia would retain Apra and "some kind of joint overarching body" would be established to deal with common issues that rose between the two banking markets.

He expected to receive a report from a joint trans-Tasman council of government officials on banking supervision within two weeks.

The report would also go to Australian Treasurer Peter Costello, who with Dr Cullen, established the council at their annual bilateral meeting in February.

At that time, Mr Costello outlined the two options he saw: one set of rules, two regulators; or one set of rules and one regulator.

The latter would see the depositor preference provisions of the Australian Banking Act extended to give New Zealanders equal treatment to Australians if an Australian bank failed.

New Zealand's four biggest banks -- ANZ National, Westpac, BNZ and ASB -- are Australian-owned.

The owners recently claimed that Reserve Bank plans to stop them moving key functions such as customer account processing overseas could cost up to A$300 ($325.8) million annually in lost efficiencies.

- NZPA